Contract Account:
The contract account is a nominal account that is used to record the financial transactions related to a specific contract. It helps in determining the profitability or loss incurred on a particular contract.

Given Information:
- Contract price: $600,000
- Material cost: $120,000
- Wages: $164,400
- Plant: $20,000
- Business charges: $8,600
- Cash received: $240,000 (80% of work certified)
- Value of material on hand at the close: $10,000
- Plant depreciated at 10%

Calculating Contract Revenue:
The contract revenue is the total amount earned from the contract. It is calculated by adding the contract price and the value of work certified.

Contract revenue = Contract price + Value of work certified
Contract revenue = $600,000 + ($240,000 / 80%)
Contract revenue = $600,000 + $300,000
Contract revenue = $900,000

Calculating Contract Cost:
The contract cost includes the direct costs incurred in completing the contract. It includes material cost, wages, and any other direct expenses.

Contract cost = Material cost + Wages + Plant + Business charges
Contract cost = $120,000 + $164,400 + $20,000 + $8,600
Contract cost = $312,000

Calculating Gross Profit:
Gross Profit is the difference between contract revenue and contract cost.

Gross Profit = Contract Revenue - Contract Cost
Gross Profit = $900,000 - $312,000
Gross Profit = $588,000

Calculating Plant Depreciation:
The plant is depreciated at a rate of 10%. Depreciation is the allocation of the cost of an asset over its useful life.

Plant depreciation = Plant cost * Depreciation rate
Plant depreciation = $20,000 * 10%
Plant depreciation = $2,000

Calculating Net Profit:
Net Profit is the gross profit minus any additional expenses or losses.

Net Profit = Gross Profit - Plant Depreciation
Net Profit = $588,000 - $2,000
Net Profit = $586,000

Preparing Contract Account:
The contract account summarizes the contract revenue, contract cost, and the resulting profit or loss. It also includes the value of material on hand.

Contract Account
-------------------------------------
Particulars | Amount
-------------------------------------
Contract Revenue | $900,000
Contract Cost | $312,000
-------------------------------------
Gross Profit | $588,000
Plant Depreciation| $2,000
-------------------------------------
Net Profit | $586,000
-------------------------------------

Explanation:
The contract account helps in determining the financial performance of a specific contract. It includes the contract revenue, which is the total amount earned from the contract. The contract cost includes direct costs, such as material cost, wages, plant cost, and business charges. The gross profit is calculated by subtracting the contract cost from the contract revenue. The plant depreciation is calculated based on the depreciation rate and the plant cost. Finally, the net profit is determined by subtracting the plant depreciation from the gross profit. The contract account provides a summary of the contract's